Receivership

What it is:

Receivership is a form of bankruptcy in which a court-appointed trustee reorganizes the bankrupt entity.

How it works (Example):

In a receivership, a receiver takes custody of the company's property and operations. A court appoints the receiver.

The receiver's job is to pay down as much debt as possible. This usually means selling company assets, laying off employees and liquidating inventories.

Why it Matters:

Companies that are in receivership are at the mercy of the receiver. In fact, the receivers control the company, making decisions large and small, and the receivers have court-appointed authority to do so. Accordingly, companies that are in receivership are usually on their last legs.

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